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We’ve certainly had significant changes to US tax law over the last few years. These changes have also had a profound impact on the filing of US tax returns for US expats living in Canada.

In this guide I hope to outline in detail the tax filing requirements of US citizens living in Canada. Please note however that those that are moving or retiring to Canada will have additional tax filing requirements and planning items to review in the year they move to Canada. These issues will be outlined in subsequent articles as this guide will review requirements for expats who have already transitioned to Canada, or those that have lived in Canada their entire lives.

Please feel free to comment below with any questions or feedback, and please don’t hesitate to email me at phil@hutcheson.ca or call or text to 250-661-9417 as I would be happy to help answer any questions you may have.

VERY IMPORTANT: Please note that the preparation of cross border tax returns involve a significant amount of technical and professional experience. The potential for very costly filling penalties is extremely high for anyone that attempts to file these type of tax returns without proper experience or guidance from a cross border tax professional. Not only is a deep understanding of both the Canadian and US tax system required but a further understanding and application of the US-Canada Tax treaty required to file such returns.

Also note that the discussions related to tax calculations and forms below are very general in nature and should not be construed as tax advice. Your situation will be specific to you and your circumstances and you will want to review your tax situation with a qualified cross border tax professional.

Now that we got the DISCLAIMER out the way, let’s move on to How to File US Tax Returns in Canada:

Introduction

US expat citizens are required to continue filing US tax returns even though they are not living as residents in the US. Essentially, regardless of where you live in the world, if you are a US Citizen or US Green Card Holder, you will be required to file US tax returns.

Whether you born in the US or born of US parents and now live in Canada, or have moved from the US to Canada, you will be required to file both Canadian and US tax returns while a resident of Canada.

Note that the discussions related below with respect to filings and required forms are for those that are fully compliant and caught up on their US filings. If you are a US citizen living in Canada that still needs to catch up on your tax returns please review the Streamline tax program for more information on becoming compliant. This will also allow you to receive your economic impact stimulus payment as an expat of the US.

Basic Filing Requirements

Two basic filings will be required of US Citizens living in Canada:

  • T1 – Canadian income tax return
  • 1040 – US income tax return

Unless the taxpayer is under the respective income filing thresholds, a US citizen living in Canada will have to file both a Canadian and US income tax return each year.

Due to the recent COVID-19 outbreak Canadian and US tax deadlines have been extended.

Tax filing deadlines for 2020 are as follows:

  • Regular Canadian T1 income tax return deadline is now June 1st, 2020
  • US 1040 income tax return deadline is now July 15, 2020 with extension available via form 4868

In normal tax filing years US Citizens living abroad are granted a 2 month automatic extension to June 15th. No prescribed form is required to elect for this extension.

Also note that those that have filed their 2018 and 2019 1040 income tax return are also eligible for the new US economic impact stimulus payments. It’s also been confirmed that US expats living outside of the US are eligible for the US stimulus payments.

Additional Filings

Foreign Bank Account Reporting

In addition to income reporting, both the US and Canada have specific filing requirements that require taxpayers to disclose foreign income and assets to each respective country:

US FBAR forms (US 114 form) – Form 114, commonly referred to as FBAR forms (Foreign Bank Account Reporting) require US persons to report their non-US banks and investment accounts to the US treasury department. These forms are extremely important for a few reasons. First, they are often missed by US taxpayers. Second, those that fail to report financial accounts on an FBAR could face significant penalties.

FBAR penalties can be up to $10,000 per unreported account or 50% of the value of unreported accounts. Unlike the T1135 outlined below, the FBAR is not filed with your US tax return and is filed separately and electronically with the treasury department. Form 8938 reporting foreign financial accounts is also required, however this form is filed with the 1040 and discussed in more detail below.

T1135 foreign income verification form – This Canadian form is required for those taxpayers that own non-Canadian domiciled assets that have a cost of more than $100,000 CAD. Assets include bank and investment accounts outside of Canada, including real property, but exclude assets such as US IRAs and personal US vacation properties. This form carries a penalty of $25 a day to a maximum of $2,500 if filed late. Something very important to note is that if you have US based non-registered accounts you’ll need to complete a fairly detailed T1135.

For US investments in a Canadian investment accounts you are only required to report totals based on a country by country basis. If these same US investments are held in a US investment account they need to be reported separately. This difference in reporting is significant and could be the difference between thousands in tax preparation fees or countless hours of time to prepare the form yourself. In these cases we tend to advise clients to review the option of transferring their US investments to Canada if possible.

US Tax Forms and Schedules Required for Expats

Please note that there are many other US income tax forms that may apply to a taxpayer’s situation. The forms below however are those that are most common for those American’s living in Canada that need to file US income tax returns:

1040 – This is the main US income tax form that gets filed each year. It contains the name, address, dependents and income of the taxpayer(s). The form summarizes income and tax calculations for the year. You’ll have the option of filing your tax return as single, married filing jointly, married filing separately or head of household.

In most cases, dual citizens living in Canada will file MFJ and US citizens with Canadian non-US citizen spouses would file MFS. In limited circumstances we might elect to have the non-US spouse file jointly, however this is quite rare. We also may use the head of household filing option in limited cases. In order to be eligible for head of household filing status a US citizen filer with a non-US spouse and a US dependent may make this filing status choice.

Schedule 1 through 6 – I won’t spend a lot of time on these schedules as they were introduced in the last few years to help consolidate information lines on the 1040 jacket and other forms. Most of the information on these schedules will come from other forms discussed below.

Schedule A – This schedule calculates all the itemized deductions available to claim. In many cases and considering how a lot of these deductions were eliminated in recent US budget, and the fact that the standard deductions have increased significantly, we tend not to use schedule A for US persons in Canada.

Not only that, but often, regardless of how much we reduce US tax, clients often don’t pay US tax because all US tax calculated on the 1040 is reduce by Canadian tax via foreign tax credits and form 1116 (more on this below).

Schedule B – This schedule outlines investment income of the taxpayer for the year. This form also contains a section often missed by expat tax filers. At the bottom of schedule B includes questions about foreign financial accounts, FBARs and 3520s. These questions are required to be answered.

Schedule C – Profit and loss from business are reported on this schedule. For those that earned self-employment income they will report these activities on schedule C. Note that dual resident taxpayers living in Canada will not be required to pay both Canadian CPP and US self-employment taxes. Under the US-Canada totalization and social security agreement, social securities taxes on self employment income is only payable in the country where the taxpayer is a resident (more on this below). Therefore, US citizens and taxpayer that live in Canada are only subject to Canadian CPP payments and not US self-employment taxes on self-employment income.

Schedule D – Capital Gains and Losses are reported on schedule D. Fairly self-explanatory, capital gains transactions are reported on this schedule including both public and private assets. A big difference between the treatment of capital losses between Canadian and
US income tax rules is that Canadian tax rules do not allow a deduction for capital losses against any income that is not capital gains. On the US side, those filing separately are allowed to deduct $1,500 and those filing MFJ are able to deduct $3,000 of capital losses against other non-capital income respectively.

A common mistake made by those filing their own cross border return or by those with a lack of experience is an incorrect calculation of capital gains for both US and Canadian purposes. Because the reporting of income on the Canadian and US income tax return need to be converted to respective currencies, the gain and loss on both sides of the border will need to be properly calculated at appropriate rates.

We convert income items such as pension, employment and business income on an average rate throughout the year. However, capital gains need to be converted at actual rates. For example:

Let’s say a Canadian resident purchased $10,000 of US stock in previous years when the FX rate was $1.10 USD/CAD. She then sells it in the current year when the stock is worth $11,000 and the FX rate is 1.30 USD/CAD. Her Canadian gain is not $1,000 x the average rate for the year (often the mistake made on tax returns we see prepared by others), but rather it is $3,300 calculated as follows: proceeds of $14,3000 ($11,000 x 1.3) less cost basis of $11,000 (10,000 x 1.10). However, her US gain in this case would simply be $1,00 ($11,000 less $10,000).

The Canadian gain is simply higher because of the change in exchange rate from the time the stock was purchased to when it was sold. It’s important to properly calculate capital gains this way for expats as the movement of currency exchange rates can significantly affect the amount of gain/loss reported on each respective tax return.

Schedule E – This schedule reports a variety of different types of income. In general schedule E reports income and losses from rents, royalties, income from partnerships, S-corps, trusts and estates.

Schedule F – Schedule F reporting income and losses from farming activities. Fairly straight forward.

Schedule SE – US Self employment taxes are calculated on this form. As outlined above, in most cases SE tax is not imposed on self-employment income earned by US citizens living in Canada. As such, no SE taxes would be calculated on this form for Canadians. In these cases a disclosure will be required to included in the return to ensure no SE tax will be owed.

Form 1116 – Form 1116 is one of the most important forms for expat returns. This form allows a US taxpayer living abroad to claim foreign tax credit on taxes paid in Canada. Incorrect preparation of this form can result in material misstatement of taxes and can result in a double taxation. The US-Canada tax treaty is in place to help eliminate double taxation between both countries. Hence the reason why form 1116 is so important to understand when preparing returns for Americans living in Canada.

Essentially, form 1116 allows a US taxpayer to claim a foreign tax credit for income tax paid on income to another country. In this guide we will discuss form 1116 in context of Canada and the US, however in many situations a US taxpayer will have an 1116 claim for foreign taxes from multiple countries.

In general terms form 1116 calculates the amount of foreign income that is taxed on your US tax returns and the corresponding foreign tax (in this case Canadian) on this income.

There are 3 “pools” of income that get calculated on separate 1116 forms:

  • General income – pension income, employment, business income, etc.
  • Passive income – investment income, dividend income, interest, capital gains, etc.
  • Resourced income – this 1116 calculates a foreign tax credit on income that is not taxable in the US pursuant to the treaty. Some examples includes US source interest, US source capital gains and tax on Canadian pension income in excess of 15%
  • Global Intangible Low-Rate Income Tax – More on this below

Generally form 1116, in reach respective pool, calculates how much of a foreign tax credit you will get on each “pool” of income. Note however that you will only receive a foreign tax credit for the lesser of the actual tax you paid on foreign income and the amount of US tax paid on the same income.

The nuance of 1116 tax calculations is beyond the scope of this guide, however if you have specific questions on these forms please leave your comments below and I’ll try to answer them as best as I can.

Also note that in addition to the 3 pools outline below, there is also 1116 AMT forms. More on Alternative Minimum Tax forms below.

Form 2350 – This form allows you to request an extension of time to file your tax return. This form is limited to situations where taxpayers file form 2555 and in most cases it is much more efficient to simply file form 4868 to request a further extension. More on deadlines and extensions for US citizens abroad below.

Form 2555 – This form is quite common on cross border tax returns, however in most cases we do not use form 2555 for our Canadian/US clients. This form allows for a deduction, in certain cases, for foreign (non-US) earned income. Unless the client only has employment income we tend to use foreign tax credits and form 1116 to reduce US taxes to nil on Canadian source income versus using form 2555. The reason for this is that if we use form 1116 for earned income so we can carry forward general source foreign tax credits for use in subsequent years.

Note that specific elections need to be made if you decide to stop using form 2555 to exempt foreign income in the US. Also, a simpler version of the form 2555-EZ is also available to those that are eligible.

Form 3520 and 3520-A – These forms, very much known and despised by expats and cross border tax professionals are often required to be filed in particular situations. Often when a American in Canada is a owner or beneficiary of a trust or receives a gift from a non-resident of the US these forms need to be filed.

Recent IRS procedures Rev. Proc. 2020-17 has exempted certain types of accounts that where previously classified as trusts for purposes of 3520 and 3520-A filings. Namely Canadian RESPs.

The assessment and filings of these forms is complex and requires proper advice. It’s important to review possible 3520 filings with your cross border accountant or lawyer.

Form 4506-T – Filing of this form results in a request for a US 1040 transcript. We file this form in order to satisfy reviews of foreign tax credits from CRA. When a US-Canada taxpayer claims a foreign tax credit on their Canadian tax return for taxes paid in the US on CRA often asks the taxpayer, through a pre or post-assessment review, for verification that they paid income tax on reported income. This transcript, once received, satisfies this request from CRA.

Form 4868 – This form allows a taxpayer to request an extension to file a tax return. Note however that US citizens living abroad have an automatic extension of 2 months from the regular US deadline.

Form 5329 – This form calculates any additional tax on IRA plans that are assessed in cases such as early or non-qualified withdrawals. Many of our clients own both Canadian and US retirement plans and in limited cases this form needs to be filed. One interesting item to note is that traditionally penalties imposed on late IRA distributions were not allowable to be claimed as a foreign tax credit in Canada. Due to changes in administrative policies at CRA, now penalties on IRA distributions can be claimed as part of your Canadian foreign tax credit claim.

Form 5471 – The 5471 is extremely important for a few reasons:

  • this form is often missed by taxpayers
  • if missed or filed late it carries a $10,000 first offense penalty and $25,000 repeat offense penalty
  • this form is terribly complicated to complete and requires an in-depth knowledge of both Canadian and US income tax rules
  • the recent US US tax changes under the Tax Cuts and Jobs Act of 2017 resulted in significant change to this form including Global Intangible Low-Tax Income regime.

The complexity of the form is well beyond the scope of this article, however I’ll do my best to summaries it here:

Most US Citizen and resident taxpayers that have more than a 10% interest in a private foreign (non-US) company are required to file the 5471. In some cases when the foreign company is inactive the taxpayer is only required to file page one of the form. In the context of this guide most Canadian taxpayers that also file US returns, and are shareholders of a Canadian corporation, must file a 5471.

This form reports the following:

  • General information about the corporation and shareholders
  • Information about the corporations income statement, balance sheet and equity statement all converted to US dollars
  • Information on how the US shareholders were compensated from the company and related loans to shareholders
  • Calculation of GILTI income if applicable
  • Calculation and tracking of Subpart F income if applicable (more on this below).
  • Other forms tracking these calculations:
    • Schedule I-1 – GILTI tracking
    • Schedule J – Accumulated E&P of CFC
    • Schedule M – Transaction of a CFC
    • Schedule O – Organizational transactions
    • Schedule P – Previously taxed earnings tracking

Very generally speaking, if a US taxpayer owns shares in a private Canadian company they will need to assess the following:

If the company is controlled by a US person or groups of US persons it’s likely considered a “controlled foreign company” for US purposes. If so, the taxpayer will be subject to certain additional tax rules such as Subpart F income rules and GILTI rules. In short, any active business income (GILTI) or inactive income (subpart F) will be subject to US tax regardless of whether it was distributed to the shareholders. In certain cases however we can mitigate any additional US tax owing by properly planning before the tax returns are due or by applying foreign tax credits to the taxpayer’s 1040 to claim a credit for Canadian corporate taxes already paid (this is a very complex area that requires professional assistance).

If a Canadian corporation is not controlled by US persons, but that particular US tax taxpayer does have an interest in the corporation, the 5471 is still required to be filed, just with less forms and calculations.

To add a further note to the 8621 discussion above. If a Canadian corporation is considered a CFC it will not also be considered a PFIC, and therefore will only be required to file form 5471 and not form 8621.

IMPORTANT NOTE: the 5471 discussion above is very general in nature and does not take into account all the complexities of CFCs or PFICs. If you are a US citizen that has an interest in a non-US private company please reach out to a cross-border tax professional for advice.

Form 6251 This form calculates whether a taxpayer will be subject to Alternative Minimum Tax (AMT). The purpose of AMT is to ensure taxpayer pay a minimum level of tax on their tax returns when in certain years, due to large deductions or low rate income. For example, if a taxpayer’s regular rate of tax on income is 15% and the calculation AMT rate is 20%, the taxpayers additional AMT will be 5%. Essentially their overall (minimum) tax rate would be 20%.

Form 8621 – Not necessarily a common form for domestic American residents, but for any Americans living in the US with Canadian mutual funds this form is likely familiar. Specific US tax rules do not allow US taxpayers from offshoring investments into foreign companies and deferring investment income on these investments. Hence the reasons why form 8621 and Passive Foreign Investment Company (PFIC) rules were developed.

In most cases, if a US taxpayer has ownership of a PFIC, defined as a foreign company that either has 75% of it’s income generated from passive source or it’s made up of more than 50% inactive investment income, this taxpayer will have to file form 8621.

Once again, similar to the discussion regarding CFCs and form 5471, the tax impact of owing PFICs will not be covered in this article. That being said, those that have ownership in Canadian or non-US investment companies should seek specific tax advice for their US filings.

One important thing to note is that, in many cases, Canadian mutual funds meet the strict definition of a PFIC. Therefore Americans living in Canada, that own Canadian mutual funds will be subject to PFIC reporting and form 8621. In many cases however the Canadian fund company provides specific tax forms to the US taxpayer that makes the filing of form 8621 much less onerous.

Schedule 8812 – This schedule allows you to claim the fairly large child tax credit. The credit is up to $2,000 per child, $1,400 of this amount is actually refundable. That being said only Canadian taxpayers with children that are US citizens with valid social security numbers or children that are physically present in the US are eligible for this credit. In cases where your children are eligible for a SSN, you should obtain the SSN in order to obtain this generous credit.

Form 8833 – This is an extremely important forms for US expats. This form is used to claim a treaty deduction or position on a 1040 income tax return. This form also carries a $1,000 penalty is not filed in a timely manner.

Some common examples of 8833 disclosures that US citizens in Canada file are as follows:

  • disclosure to exclude payments of self-employment tax on business income
  • disclosure to resource certain types of US source income such as interest income and US capital gains
  • exclusion of CPP, OAS and US social security payments

Form 8840 – This form is really only filed with 1040NR returns or as a separate form with the IRS. In cases where non-residents of the US spend enough time in the US (under the substantial presence test) they are allowed to file this form to outline to the IRS that they are a more closely related, for tax purposes, to a foreign country. In effect, not requiring the taxpayer from having to file a full 1040 income tax return even through they meet the substantial presence test.

Form 8854 – This form is specifically required for those that have expatriated in the year. This form reports a taxpayers renunciation from the US and related tax consequences.
A discussion of this form is beyond the scope of this articles, however some main points are as follows:

  • When a US citizen applies and is eligible for citizenship renunciation the taxpayer needs to file from 8854 for the year they expatriated
  • If the expat’s net worth is less than $2,000,000 then the tax impact of expatriation is relatively straight forward (other than the last year of filing requirements).
  • If the taxpayer is over $2,000,000 in net worth at the time of expatriation the taxpayer is considered a “covered expatriate” and further tax consequences result.

K1 Form Entries – The K1 form is actually a slip you’ll receive if you are a shareholder of an LLC, partnership, S-Corp, C-Corp or if you are a beneficiary of an estate or trust. Although this is not a form in the 1040 it is a slip that many US citizens in Canada receive that need to assess when they file their US income tax return. A Canadian resident may receive the following types of K1 forms:

  • K1 from an S-corp of LLC – This form will allocated income of an S-corp or LLC to a taxpayer. It will note only allocate this income, but outline what type of income is allocated. Note however, that these US style flow-through entities are often not very efficient for Canadian purposes and often result in double taxation. If you or your client receive K1 distributions of any kind please reach out to a competent cross border tax professional for advice on how to deal with these allocation slips
  • K1 from US partnership – This form allocates income to a taxpayer from a US partnership
  • K1 from trusts and estates – A taxpayer will receive a K1 often from trusts or estate for which they are beneficiaries. Once again, the tax rules related to distributions to taxpayer from foreign trusts and estates are complex and require proper review and planning. Canadians reporting trust and estate distributions from foreign sources should also be filing form T1142 to properly report these distributions (more on this below).

Form 8938 – This form, similar to the FBAR form discussed above reports foreign financial accounts to the IRS on 1040. Some main differences between the FBAR forms and the 8938 forms are as follows:

  • The FBAR is filed with the treasury department apart from the actual 1040 income tax return.
  • The 8938 is filed along with the 1040 income tax return
  • Unlike the FBAR, certain types of foreign pensions are required to be reported on form 8938
  • Signing authority over corporate bank and investment accounts are required on the FBAR, but not on the 8938
  • The 8938 also has additional information required on the form including whether an account has been closed in the year and how much income is generated in total from foreign accounts

Form 8960 – This form calculated the original Obamacare net investment income tax. This additional tax was introduced a few years ago to help fund the US medical system under Obamacare. Canadians are also subject to this additional income tax. The additional income tax of 3.8% is on income above certain thresholds, $125,000 for those filing single or married filing separately and $250,000 for those filing jointly. Note that this 3.8% tax is only on investment income above these thresholds.

However, this additional tax is not part of “regular income tax” and therefore not able to be reduced by a foreign tax credit via from 1116. Hence, taxpayers with investment income over the thresholds above may face additional US tax that cannot be offset by Canadian taxes.

Form W9 This form, often requested by investment and banking institutions is simply a request from a US citizen for their US Social Security Number. This form is held by the institution requesting the form and is not sent to the IRS or treasury department.

You’ll notice from the forms above that many of the “deduction” forms are not included. This is because in most cases, regardless of how much you reduce US taxes on a 1040 you have more than enough Canadian taxes to offset this amount. There are certainly cases where we need to use deductions on specific forms or those on schedule A, however these cases are not very common for expats.

The guide above outlines what to forms file on a US 1040 income tax return while a resident in Canada. The filing of Canadian returns for US residents is not outline in great detail. However to help provide some insight I’ve outlined some of the main points and additional forms a US citizen would want to review when filing their Canadian return:

T1 Canadian Income Tax Return Forms for Expats:

T1135 – Similar to the FBAR forms outline above the Canadian tax authorities also want to know about your foreign assets. Form T1135 was discussed above.

T1142 – In situations where Canadian residents receive distributions from foreign trusts or estates they need to fill form T1142 to report both the capital and income portion of the distribution. Because many Americans living in Canada will, at some point in their lifetime, receive distributions from a US estate or trust, we tend to file this form fairly often.

T1161 and T1243 – In cases where a Canadian may leave Canada and become a non-resident of Canada for tax purposes (often by moving to the US), these forms are required to be filed on their Canadian exit return. Generally speaking, when a Canadian becomes a non-resident of Canada most of their worldwide assets (excluding certain assets such as Canadian real estate) are deemed to be disposed as if they were sold. Form T1161 and T1243 report these assets in that particular year.

T2203 – For taxpayers that provide professional services or do business in another province or country this form is required to properly calculated where this income will be taxed.

T2209 – This is a very important form for Americans with Canadian filing requirements. This form allows you (similar to form 1116 above for the US 1040) to claim a foreign tax credit for foreign taxes paid to other countries. For example, an American living in Canada earning US pension income will be taxed in the US first on this income. They will also be taxed in Canada on this income, but they will receive a foreign tax credit on form T2209 for the US taxes already paid or accrued, hence eliminated double tax on this income.

Note that many of the forms above carry high penalties if not filed in a timely manner.

Other Issues

Often, our American clients have taxable income from various states. Whether it’s income from rental properties or part year tax returns for those moving up to Canada. State tax returns are often required in addition to the Canadian and US income tax return.

The discussions above relate to filing requirements of US citizens only. Often Canadians that are not US citizens have to also file a US tax return, namely a 1040NR income tax return for non-residents of the US. Canadians may need to file a non-resident income tax return in the following cases:

  • Sale of property in the US
  • To report rental income in the US
  • To pay tax or claim a refund on under-withheld US source income (often US source pension income)
  • Reporting of gambling winnings

In cases where a Canadian or US taxpayer needs to made a revision or correction to their US or Canadian income tax return, form 1040x or form T1adj are available respectively to make these adjustments.

Conclusion

As you can see from the outline and discussion above, the filing of US and Canadian income tax returns for Americans in Canada is almost always complex and multifaceted. Engaging an experienced US-Canadian income tax adviser to assist in these filings is always advised.

Every year we file over 700 US income tax returns for Americans living in Canada. If you need help with your cross border filings, or simply want to chat about services or questions you may have please feel free to reach out via email to phil@hutcheson.ca or via phone or text to 250-661-9417.

I look forward to speaking with you.

Phil Hogan, CPA, CA, CPA (CO)
250-661-9417

An archived version of the previously posted guide can be viewed here

Phil Hogan

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53 Responses to “How to File US Tax Returns in Canada (Ultimate Guide updated for 2020)”

  1. Sevens says:

    Good morning,

    I am a Canadian non resident that has been living overseas for over 14 years. Over the years, I have build a decent company that located in Hong Kong. As my kids are growing up, I am looking to return to canada.

    I am looking for accounting or tax advisors that can help me structure my assets so I can return to canada. I understand that all my gains from overseas while I was not a resident of Canada won’t be taxed, my concern is how my asset in my companies, my yearly dividends or my potential sales of my company would impact my taxes here. Is there a better time to return to canada to reduce my taxes? Or should i have a specific corporate structure that I need to establish when I come back to Canada?

    If you are expert in this domain, please let me know.

  2. Ben20 says:

    I was born and raised in the US and moved to Canada in 1993 at the age of 23. I have dual citizenship and have only been back there a few times in 25 years.

    I have not filed or paid any taxes in the US since I moved. I have just opened a brokerage account and I had to declare US citizenship and I now have some concerns.

    What is the first step in getting citizenship and taxes in order or to renounce US citizenship.

    Have a great day.

  3. Ken says:

    1. My wife and I are Canadian citizens

    2. We bought a house in Regina, SK in 2015 and used first time Home Buyer Plan, each of us has about 5000-6000 dollars on
    balance to payback (i.e. buy back RRSP?)

    3. In Sep 2018, I moved to US with TN visa first and did not go back to Regina until Aug 2019 to move whole family to US.

    4. In Aug 2019, my son(10 years old), my wife, and I moved to Washington. My wife was TD visa or status. Then she changed to
    TN vista in Sept 2019. She changed status at the border between US and Canada near Washington/Vancouver. We left Washington border and entered into Canada at 9am, then got her TN visa at 1130am, and immediately back to Seattle, WA.

    5. Since she got her TN visa, we did not go back to Canada.

    6. Since I got TN in Sept 2018, I only spent 7 days in Canada, i.e., from Aug 10 to Aug 16 to pack the belongings and moved whole family to WA.

    7. Both my wife and I canceled SK driver licenses, both have US Washington driver licenses

    8. Both cars are registered in WA and insured by US Geico Co.

    9. Both of us plus my son are covered by my employer provided health insurance, all SK provincial health cards were cancelled.

    10. We are living in apartment in WA. The house left in Regina is vacant. The house was listed in the market for sale one week after we left Canada in Aug 2019. It was delisted in Feb 2020 due to hard sale and poor market. It will be relisted anytime soon.

    11. We still have TD and RBC banks checking accounts and credit cards in Canada, but only used rarely, mainly to pay house mortgage and property tax and utilities(gas, water, power, etc.)

    12. We do not plan to go back to Canada anytime soon, not in 3 or 5 years as minimum.

    13. Both of us have filed US tax returned and refunds have been received. 1040 and 1040 NR, respectively.

    Based on the above information, I seek advice from you on the following questions:

    1. We want to sever the tie with Canada from the perspective of tax return purpose. Do you think we can file FINAL tax return and EMIGRATE out of Canada, and CRA will accept this residential status change?

    2. Or we have to file Canada tax return with Residential Status?

    3. Can we set up phone consultation also?

    Thanks

  4. F. White says:

    I am a dual citizen living in Canada. My only U.S. income is my social security which I pay tax on in Canada.
    Am I required to file a U.S. tax return?

  5. yen says:

    Hello, I’m reaching out on behalf of a small family business here in Calgary.

    I need one who has expertise in US and Canadian tax law, US Social security policy, and simple business formation here in Alberta.

    Situation:

    The business is currently owned by a sole proprietor, who is on the title of the current retail lease (as a lessee), who would like to pass the business on to his Brother before the end of the month. The business has revenues of approximately $500K a year, with profits approximately around $50K per year.

    However, the Brother is a Canadian/US dual citizen who will also be eligible for US social security when he comes to retirement age. The brother is worried about US Tax implications and effects to his US Social security eligibility or payout.

    Questions – In the event the Brother is transferred the business title and renews the lease under his name:

    -Would the Brother have US tax obligations under US tax law?
    -Would the business affect the Brother’s future US Social Security eligibility or payout amount?

    -If a corporation is able to be formed for the Brother to run the family business through as the sole director and shareholder, would there be US tax obligations under US tax law?
    -Would the corporation affect the Brother’s future US Social Security eligibility or payout amount?
    -If there is an affect to the Brother’s US tax obligations or Social Security Benefits – would an arrangement of additional director/shareholders be able to mitigate these factors?

    -In the event that forming a corporation is a viable option – could it happen before the end of the month?

    -Are there other options?

    If you are able to provide some guidance on this matter that would be most welcome. If so, is there a time we could meet or call to discuss this matter (or alternatively, if we can do this via email) and possible quotes for your time? If the above is out of your scope of expertise, thank you for your time and any referrals would be appreciated.

    Thanks

  6. Vanilla virtue says:

    I hope you are well. I am emailing on behalf of myself and my husband. We are looking to get a professional to help us with our taxes this year and on a go forward basis.

    We are a military family that has been temporarily posted to Seattle WA in July of last year to July 2022. My husband continues to get paid by the government of Canada and most of our living expenses in the USA are covered by the military, in addition to our moving expenses. That being said, I worked half of the year in Canada while the rest of the time in US. We kept our home in Ontario and are renting it out to a tenant for the entire cost of the mortgage, but we pay our property taxes out of pocket, and have a property manager looking after the property for us. We have made many improvements to the home during that time that it was rented out.

    Our mail from ourhouse if being forwarded to my sister’s in Waterdown so unfortunately I don’t have my T4s with me in Seattle, but I’m sure that is something that you/I can pull off the CRA website when the time comes.

    I know that that was a lot if information but we want to be very transparent so we can get an accurate quote for your services, and also ensure that this is something you can handle. I will probably have to file my taxes in Canada and the US because I worked in both places, but that I’m not entirely sure of, hopefully you will know and provide the appropriate guidance for us.

    This is a complex but exciting file and I forward to hearing from you to help us with our taxes going forward :)

  7. m-mon says:

    Hi,

    I’m an American and Canadian citizen living in Canada. I have never filed taxes in the USA. I am up to date with my Canadian taxes.

    I am considering moving to the US (not right away – no rush) and would like to get up to date with my US tax filings. I need help with this and I’m also wondering what kind of cost I am looking at.

    Thank you,

    M

  8. jenny200 says:

    Hi. We just relocated to Victoria and we need a good accountant here who understands Canada/US tax laws as we have financial resources in the US. I also need consultation on what kind of business license I need as a professional offering training services (no employees). Thank you in advance for your speedy reply!

  9. ghat says:

    Im an American that worked in Canada last year and was told I can get back all my Canadian taxes back now that I am
    back in America. I was paying both Canadian and American taxes as an American living and working in Canada for 8
    months. Any help would be greatly appreciated.

  10. Eliza says:

    For a Canadian working in as a US resident, where does one report income from T4A (RESP) on US tax returns? I’
    understand 3520 is no longer required to be reported on but do I report income on 1040 line 7a and schedule 1?

  11. Fran says:

    Hello,

    I am an American expat living in Victoria the past 4.5 years. I opened a TFSA in August 2019 and have recently learned this
    is inadvisable for Americans. I was told that an RRSP would be better. I want to talk to an expert about this, and/or the ideal
    plan of action for me to invest my money while complying with the IRS. Thank you.

  12. Mike Parekh says:

    Hi Phil,
    Being a Canadian citizen, my friend worked for 40 days in USA on TN visa earning $13k. Not a US citizen or GC holder, is he supposed to file 1040 or 1040NR? Not lived in USA in earlier 2 years for more than 60 days.
    Any relief under double tax agreemnt treaty

  13. Devesh B says:

    Hi, I am a Canadian citizen. I got married this year and my wife is a US citizen working in the USA. I am still working in Canada as my green card is in process. I am filing my taxes in Canada. Do I need to include her income in the USA in my tax filing?

  14. Linda Adsetts says:

    My husband is a Canadian citizen who worked in the US on and off and he has a TIN #
    In 2019 the company he repped went under and he did not work at all in the US. Do we have to file a nil return?
    Thanks so much.
    Linda

  15. Evan says:

    Hi I’m a Dual American/Canadian citizen living in Canada and preparing a return for the first time. I’m wondering about form 8833 and if I need to file this form. I’m preparing a basic return that includes income from Canadian T4’s and a small amount of tip income. I’m not familiar with any of the treaty provisions and not sure where to find information on them, or if I even need to file provisions at all. Let me know if you could help me out with any info. Thanks!

  16. Dawn says:

    Hi Phil, I am a US citizen living and working in Canada. I have a BASIC return to file but not sure I have been doing it right as I am doing it myself. I am just wondering how much your services are so I know I am doing this right. It seems silly to pay for someone to do my taxes but I also don’t want to be penalized for doing them wrong. Please let me know.

    PS. I completely forgot to do my US taxes last year and still need to file this years too.

    Thanks
    Dawn

    • Phil Hogan Phil Hogan says:

      Why does it seem silly to pay someone to help with taxes? I pay people to service my car, mainly because I have no idea how to do it myself.

      Phil

  17. Amjad says:

    Hi
    I am a Canadian and I received a 1042-S ( Foreign Person’s US Source Income Subject to Withholding). Do I need to file a US Income tax? IF yes, how do I go about doing that?

    Thank you

  18. Sean says:

    US Citizen who common-law married my fiance to move up to Canada. My wife is a medical student at a school in Toronto.

    I work remotely for a US company and earn 100% US income. Most of our liquid funds are in American accounts but we jointly own a Canadian bank account.

    We also have American investment accounts.

    We are not full-time residents. I have an 18-month TRP (filing for permanent now but don’t expect results for a year). Wife has 3.5 years residency to finish her program.

    I have no idea how all of these facts interface with Canadian or US tax authority rules. We could very much use some expert advise.

  19. Scott says:

    I am a Canadian / American Dual citizen. I am enrolled in Canadian Tax Free Savings accounts, and from what I understand any interest accumulated within those accounts are not tax free from a U.S. tax perspective. I have been listing interest earned as taxable in the U.S. tax forms. Now I am reading that TFSA’s should be considered as foreign trusts, and elsewhere that the TFSA should be classified as pension protected under Article XVIII of the Canada/US tax treaty. This is all very confusing, particularly when in comes to TSFA Mutual funds which I am considering closing due to what could be considerable reporting requirements with little future tax benefits. Any suggestions or pointers where I can find more information on the Tax implications of a dual citizen holding a TFSA would be greatly appreciated. Thank you.

  20. Joe says:

    Hello, my daughter is a US citizen, and has been a resident of Canada since she was 6 years old. She’s now 19 and is working in Canada. She’s never filed in the U.S. (or Canada) before. I believe we can file online in Canada, and was wondering if she can file online in the U.S. Her earnings will be very small (less than $10,000 for 2018.) Can you advise on what the best course of action would be to make sure she maintains proper and legal standing w.r.t. U.S. tax laws?

  21. MaKaela Carter says:

    I am a US citizen. I lived in Canada until May 2018. Half of my income in 2018 is Canadian and half is US income. What do I need to file US taxes? Canadian taxes?

  22. jasmir says:

    I’m a US citizen and my wife is Canadian only. most of my income is from Canada and I have some US pension income that I report on my 1040NR each year. I don’t normally pay very much tax on my US pension income, but I’ll be taking out much more from my IRA this year and I’ve estimates around 18% US tax. I’ve done a foreign tax credit on my Canadian return for investment income but not for my US pension income because I never paid much US tax on my pension and/or IRA.

    Also, is there any way to reduce the tax I pay on the withdrawals from my pension?

    Thanks

    Jasmir

    • Phil Hogan Phil Hogan says:

      Hi Jasmir

      Some of what you outline above doesn’t make sense. If you’re a US citizen you should be filing a full US 1040 return and related forms such as FBARs and 8938s. Your worldwide income needs to be included on your 1040, not just your US source income. You’ll only be required to pay 15% tax on your US pension income as the additional tax will be resourced to Canada (fully taxed in Canada with a foreign tax credit for the 15% paid to the US).

      Other than Canadian deduction there will not be a great way to reduce tax on the pension. If I’m correct about the above filings you’ll want to ensure you adjust your previous tax returns to include your worldwide income. Give me a call and we can chat.

  23. Dave Massola says:

    I am a dual Canadian and US citizen that will retire in the USA. When I withdraw my RRSP there will be a Canadian withholding tax of 25%. Is there any way I can offset this amount on my US tax return? Can I draw my US 401K amount and use the withholding tax credit against it?

    Thanks

  24. Kathy says:

    I’m new at this. I moved back to Canada from US…i have dual Citizenship….my permanent resident is Canada…would like to know what form i need to fill out for Income taxes for US.

    Pls & Ty
    Kathy
    waiting for reply

  25. jaswinder says:

    HI MR. PHIL, I HAVE CANDIAN COPPRATION AND I HAVE A INCOME FROM USA AS WELL I HAVE A US TAXPAYER ID (TIN)

    PLEASE HELP ME HOW I CAN FILE TAXES

    THANKS

  26. jaswinder says:

    hi phil , i amcanadian citizen, i am insurance agent i have a commision income from usa , i filed my taxes in canada , i am wondering if i have to file taxes in usa as well please guide me
    thanks

  27. Mathis says:

    Hi, I have an American passport and I currently live and working in Canada (and have for the past 3 years.)

    No one seems to want to deal/explain the 8833 form. I even emailed people who file american taxes, but they said they didn’t deal with things like the 8833 form ?

    And I have searched high and low on the internet for how to fill it in myself, to no avail. In addition to this, the IRS seems to take this form very seriously, with fines if it’s filled incorrectly.
    My situation really isn’t that complicated. I make a fixed income here in Canada, and I pay taxes, that’s it. Is there nowhere I can find how to fill in those 6 lines on the form ?

    Do I actually need to file this form ???

    thank you

  28. Doreen Garon says:

    Phil. We are Canadians who sold our winter home in U.S. last year. We will have a capital loss on it and I was wondering if we still have to file a U.S. Income tax form. They did not hold back any money from the sale and we do not have a U.S. ID tax filer numer.
    Any information you can give us would be appreciated. Thank you

  29. Marie Pasion says:

    My mother inherited money from her brother in the US and got a form 1099-R. Tax was withheld at 20%. Does she still need to file a 1040NR (will she get a portion of this tax back under a treaty agreement?)

  30. Dirk Geijsbeek says:

    Good Day,

    I moved from Seattle, WA, USA in OCT 2016 to live in the Toronto, ON area as a Canadian Permanent Resident and Landed Immigrant.

    I started working for a Canadian Bank as a full time “contract” employee (with no benefits) from NOV 2016 to NOV 2017, and I started at another Canadian Bank in NOV 2017 as a full time permanent employee with benefits, including a pension plan, which started this year (2018).

    I have been married to a Canadian Citizen since 2015 (she works in retail part time) and have been living with her since I moved up here in 2016 and we have a joint bank (checking/savings) account and I got my OHIP card 3 months after I moved up here.

    Please advise what CRA and/or IRS forms I should fill out.

    Thank you.

  31. Paul says:

    Hi Phil,

    I’m a Canadian, married with one child who’s 18 yrs. old. First Time to work here in U.S. I’m filing my TAX return here in U.S. and Canada as well. I already have my W-2 form. Need help cause I feel my company only withheld about 21.0% of my total income for TAX. What step do I need to do?

  32. I recently moved to Canada from the USA and I have no idea about my tax situation. So can you please share some information about what I have to do? Do I have to hire an agency for this purpose?

  33. Diane says:

    I am an American who made a *very modest income from one employer in 2016. I am married (to a Canadian) and have a Canadian bank account. I feel very confused about all the different filing schedules involved with the 1040 form.
    I’m guessing I don’t list my income from my T4 where you would put your W2 wages…this is all very confusing.
    Thank you in advance for any help…this is a very complicated process for such a simple income level.

    Cheers!

  34. EH says:

    The US-Canada tax treaty stated that full-ear residents of Canada owe normal wage and dividend income to the CRA. Logically, it would seem that taxes should be filed with the CRA, which shares info with the IRS besides. Some people in this situation just file Schedule D every year without 1040 with the IRS I’m told by a tax preparer in the U.S. Technically they “filed”, just not a whole return. There’s no version of 1040 for expats in countries with treaties allocating any of the types of income that taxpayer earned to that country. If a taxpayer files 1040 saying they had income, and don’t pay it because they paid the CRA, isn’t there a risk the IRS will get confused and think you owe the IRS? Is a cover letter filed with 1040 sufficient to avert owing, or should the foreign tax credit be applied instead as though there were no treaty? Do treaty elections need to be made on a form and can that be filed with an amended return?

    I asked the IRS to make a written statement on this matter and they kept sending letters saying they need 45 more days. For 2 tax years I sent Schedule D only and have received no letters indicating this was insufficient to be in compliance. I’ve kept my Canadian address updated with the IRS.

  35. Allen Morgan says:

    1.) Can I eFile form 1040?
    2.) Can I efile FBAR forms?

  36. THOMAS KOREMAN says:

    Do I file the Canadian tax return first and then file the 1040?
    How much do you charge for a U.S. person living in Canada to do
    their U.S. tax return? They earn $24,000 management fees per year.
    2012 income was nil.
    2013 income was nil.
    2014 income is $24,000.
    2015 income is $24,000.
    2016 income is $24,000.
    He is married and living in Canada.
    The spouse is a Canadian doctor.

  37. Mike says:

    I am a non-resident alien of United States – 100% Canadian – I signed a entry level hockey contract ( American team) and received a signing bonus in 2016 ; I was not paid for any other services in the United States – I do not have a SSN or green card – do I have to file a US return?

  38. Michelle says:

    Hi Phil, I was wondering if you could offer some guidance please. I’m a Canadian who won a small jackpot in Las Vegas where of course, they withheld 40% of my winnings. It equates to close to $400 – so trying to determine the best way to maximize what the US Government will “give me back”. Any help is very much appreciated. Thank you in advance.

    • Ron Janes says:

      I WON A SMALL JACKPOT IN FLORIDA AND THEY WITHEOD 30% IN TAX [$130] HOW CAN I MAKE AN EFFORT TO CLAIM FOR RETURN?? I AM CANADIAN AND HAVE NO OTHER UE INCOME THX

  39. Michelle says:

    Hi Phil,

    My husband is a US Citizen, living in Calgary for over 15 years as a permanent resident, and filing Canadian tax returns for his Canadian income.

    In 2016, in addition to his self-employment income in Canada, he also earned US income that he has on a W2 and also on a 1099-MISC as he spent 6 months in the US.

    He is reporting this income on a US tax return and will be paying US taxes on it. Does he also have to report it on his Canadian tax return given that he’s a US Citizen, with US Source income, and paying US taxes on it?

    Many thanks,
    Michelle

  40. Kathy Millard says:

    Hello
    I moved from the US to Canada 09/2010 (filing my US returns only for that year). I did not work in Canada until 2/2013 (I had to wait for my permanent resident was approved). This year, I just recently found out I had to file both a US and Canada tax return.

    What is the best way to file now? I would need to file 2013, 2014, 2015 and 2016 (I filed a Canadian tax return all those years).

    Hoping that you can help me.

    Thanks

    Kathy

  41. Kat Spencer says:

    Hi Phil,

    I am attempting to file my American return on my own this year however there are no directions available regarding how to align my T4’s and W2 values. I’ve looked at all my old taxes and can’t seem to line the numbers up event when incorporating exchange rates at the time. I only have one T4 and my previous accountant charged $550 for this. Advice?

  42. Ima Rez says:

    Hello , I’m Canadian artist and travel to US for performing my music show , my promoters paying after they deduct 30 % us tax and 10% commission wire me the rest and other travel expenses manage by my Canadian promoters ans orgnizer ,need all step to do taxes and as Canadian to do this for us I m having p2 performing permission and EIN number that’s all
    Appreciated any help
    Ima Rez

  43. Tim says:

    Hi Phil,

    I am a Canadian citizen who moved back to Canada in August. I had spent the last four years in the USA, 2 as a student and 2 working under the TN visa. Do I need to include the income I earned in Canada after my return in August on my USA tax return?

    Thanks,
    Tim

  44. Stephanie Ayon says:

    I live here in Edmonton Alberta since 2013, I am currently a Permanent Resident now since 2015. I am an American Citizen. I moved here because my mother passed away in 2013, i now live with my father. I only worked for my mother as her Caregiver since 2007 to 2012, five years. I never filed Tax Returns in the US. I am also planning to be a dual citizen in the near future and I want to know how to file US tax.
    I want you advice!
    Thank you!

  45. Hello, I am a canadian who is partner in an american LLC. Doing my work virtually from my home in Saskatchewan. This LLC is just starting, this is the 2nd year…I am also self-employed and generated revenue in Canada. I believe I need to file a return in US (Maryland) and file a return in Canada (no question on that). How do the two filing coincide? or do they?

  46. Henry P says:

    Hi Ben,

    I’m a Canadian citizen and have recently got a US Green Card. I’ve a job in Canada and have been filing my return. I plan to take a re-entry permit for US, as I’m not yet planned to move to US. In the mean time, I understand that I’ve file my tax returns in US as well. What’s your advice?

    Thanks,

  47. Jerry_c says:

    I live in Vancouver and have been getting my US tax returns prepared by a local CGA. He doesn’t charge much, but I’m concerned that he’s not as knowledgeable as he should be on these matters. I questioned by about the FBAR form and he said it wasn’t something to worry about. After reading about the penalties I’m starting to get worried.

    What should I do??

    J

    • Phil Hogan Phil Hogan says:

      Hi Jerry

      I definitely wouldn’t agree that not filing FBARs is something not to worry about. If you haven’t filed prior year FBARs you may have some options for catching up these information returns.

      Please give me a call at 250-381-2400 and we can run through your options.

      Thanks

      Phil

  48. Ben says:

    Hi Phil

    I’m a doctor that recently moved from California to practice in Victoria. Most of the MDs up here are incorporated. Considering I need to file both in Canada and the US should I consider incorporation?

    I’ll also need help with my 2015 US/canada tax filings along with my wife and 2 kids.

    Thanks
    Ben

    • Phil Hogan Phil Hogan says:

      Hi Ben

      Thanks for reaching out. The choice to incorporate will depend on several factors, however it’s often an efficient way to earn professional income.

      If you have the ability to defer or split income with a spouse the savings could be significant. We would however need to review both the Canadian and US tax implications of such a structure.

      Can you give me a call in the office at 250-381-2400 and we can chat.

      Thanks

      Phil

Philip Hogan

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

Phil Hogan

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